Washington's in Denial Over the Lousy Economy

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Looking at the latest economic numbers, The New York Times’ David Leonhardt is worried. Jobless claims were up last week, and the economy is growing much too slowly to make much of a dent in unemployment. The housing market's a disaster, the price of gas is way up (over last year), and consumers aren't spending enough. Policy makers have tools to help the situation in the short term, he writes, but they seem to think the slowdown's just a blip. Let’s hope they’re right, Leonhardt writes, but there are good reasons to think otherwise – among them the fact that “the history of financial crises shows that they produce weak, uneven recoveries, with unemployment remaining high for years." So what should Washington do? Leonhardt would like to see the Fed should stop worrying so much about inflation and look at how else it might juice the economy, and Congress to further extend business tax credits, household tax cuts and jobless benefits. The one thing not to do, he says, is go crazy trying to reduce the deficit too quickly, the approach Europe has taken, with dismal results. Above all, denial is not the answer. “Americans are understandably eager for good economic news," writes Leonhardt. "But wishing for it doesn’t make it so. You have to wonder whether the people in Washington have learned that lesson yet."

• As the Economy Wavers, Is Washington Paying Attention? [NYT]